1. (C) French Ambassador Bajolet told the Ambassador onJanuary 23 that he and the French government are worried thatAlgeria is gradually headed towards more instability, butthey do not see an alternative to Bouteflika's remaining inpower for a third term beginning in 2009. Bajolet, whoserved here in the 1980s, said that the French strategicinterest in Algeria above all is stability and economicgrowth. Increased pressure on Algerians to emigrate toFrance because of a lack of opportunities in Algeria weighsheavily on French political sensitivities and ultimately onthe social ties between the two countries. The Frenchgovernment, he said, sees few positive developments inAlgeria now:

-- municipalities, who are closest to the population, haveno authority or resources to address needs locally; -- there is an inability throughout the government to makehard decisions; Bajolet called it a kind of immobilism; -- the political parties have little space and seem readyto make short-term deals at long-term political loss; -- public interest in the formal political system hasdiminished sharply, as seen in the two 2007 elections; -- the business climate is difficult and not improving;and investment and job creation are lacking (Bajolet notedthat a French business association had prepared a white paperthat detailed problems French companies face in Algeria andhow to recitify them. Bajolet observed that the InteriorMinister Zerhouni and the Algerian government were anxiousthat it not be released publicly.); -- corruption, all the way up to the Bouteflika brothers,has reached a new level and is interfering with economicdevelopment;

BOUTEFLIKA'S THIRD TERM AMBITIONS---------------------------------

2. (C) Bajolet said he understood that the security serviceleadership has given its approval for the constitution to bechanged so that Bouteflika can run for election again in2009. Bajolet stated that Bouteflika's health is better andthat he might live several more years. His improved healthand activity has given him more leverage over the army, hespeculated. That said, Bajolet also opined that theconsensus within the top security leadership to support athird term for Bouteflika resulted in part from thewidespread view that Bouteflika will not finish his thirdterm due to his his health problems. The relationshipbetween the security services and Bouteflika is stillticklish. For example, the French have concluded that thesecurity services encouraged Minister of Veteran AffairsCherif Abbas to criticize Sarkozy on the eve of the Frenchpresident's visit in order to embarrass Bouteflika byprovoking the French to cancel the trip.

3. (C) Bajolet said the French are being extremely carefulabout what they say to the Algerians about changing theconstituton and enabling Bouteflika to run for the third termthat everyone understands he will win. Bajolet sensed thatthe Algerians clearly floated the idea publicly again rightbefore Sarkozy's visit in December to test whether the Frenchpresident would advise against it. He intentionally did notdo so. Bajolet observed that the French see no obvioussuccessor to Bouteflika. Former Prime Minister Hamrouche, henoted, speaks of reform but the French are unsure whether hecould actually push through a reform program. Former PrimeMinister Ouyahia, they believe, is yet another apparatchikand has little popularity in the country. Bajolet concludedthat without an obvious successor, pushing against Bouteflikasimply opens up new sources of instability. Instead, theFrench have decided that the best message for them to deliveris that they are neutral on the issue of Bouteflika's thirdterm but that the government needs to start addressingAlgeria's serious economic and political problems. (Bajoletis particularly interested in decentralization, for example.)

Western schools had put him in a difficult spot, he noted,since there are two official French schools in Algiers.Bajolet asserted that Al-Qaeda in the Islamic Maghreb (AQIM)appears to target the Algerian government mainly and targetsforeigners only as a means to embarrass the government. TheAmbassador disagreed, expressing his view that AQIM istargeting both but with different goals. It targets the GoAto embarrass it and as a means of retaliating for AQIMlosses. It targets foreigners to drive them out of Algeria(and ultimately help destabilize the GoA). Bajolet notedthat there are multiple French vulnerabilities, includingFrench cultural centers around Algeria and scattereddiplomatic residences. So far, however, the Algeriansecurity services have handled threats to the Frenchappropriately and have, he claimed, kept the Frenchauthorities informed.

5. (C) COMMENT: Bajolet opined that external pressure on thegovernment here to try to force it to drop the Bouteflikathird-term idea will not compel the GoA to drop it. Instead,he thought, it would merely make working with the Algeriansmore difficult, and the French now perceive that on bothsecurity and economic/social issues they must work withAlgiers. He readily admitted that the medium- and long-termoutlook here is not good unless the government really beginsto fix the economy and the political system. He was notconfident that it would, but he had no clear idea of what todo in that case.FORD